No froth, and a clear head

A cursory glance at Whitbread might leave you wondering why the company is still held in high regard by City watchers, who are generally disillusioned with its competitors. Brewing is still the cornerstone of a business that has diversified into the leisure industry. However, it is the brewing side that looks superficially unattractive.

The beer company accounts for about 30% of group revenues but only about 12% of profits. Hardly the sort of returns that get investors’ blood racing.

So if the brewing sector is going flat, why is the Whitbread Beer Company’s finance boss the group’s longest-serving director?

‘Turnover in itself is not regarded as important. It’s a way of generating profits,’ explains David Coldwell, finance director of the beer company since 1989, blaming the uniqueness of the brewing industry for the apparent disparity between the two. ‘We have a high turnover in the beer company because we wholesale a lot of wines and spirits that are very, very low margin. They are really only a service for our own business and some of our free trade customers.’

Just the same, Coldwell acknowledges that in some ways the importance of the beer company is on the wane. ‘If you went back 15 years, it was probably 50% of the profits of the business, whereas now it’s down to below 15%. But it’s a well valued part of the business because of its brands. And our business as a whole is a brand-led business.’

Importance of brands

Brands are now everything in the brewing industry. The brewers themselves have changed. Whitbread’s chain of budget hotels, Travel Inn, and its sports clubs, the David Lloyd Centres, are now as important as brewing.

But it is the structure of the pub business that has changed most.

Ten years ago, most pubs were either under single-outlet ownership or brewery-owned. That all changed at the end of the 1980s when the government forced the brewing companies to sell off their tied houses. Now there are huge combines that own upwards of 2,000 pubs – the country’s biggest landlord right now is the Japanese bank Nomura.

‘What’s happening every year is the gobbling up of single pubs and smaller chains of pubs by a smaller number of huge chains,’ says Coldwell.

‘It’s very much altered the balance of power in the whole industry. They are able to command very low prices from the brewers. There have been real price decreases every year for ten years and the power of these pub chains is massive.

‘Every time there is a merger or takeover we come under more pressure.’

There are now more brands among high street pubs and restaurants, and it is the beer company’s job to service them. ‘The value of the beer company is not only that it is a provider of beer for our own outlets in Whitbread and is a secure and growing area of profitability with a pretty high return of capital,’ says Coldwell.

‘It has also got a lot of skills the company as a whole values.’

Coldwell and his finance managers play a crucial role in every aspect of the business. ‘I have finance managers within the bowels of every part of the business,’ he says.

‘I have people within the brands marketing team and people within every sector of our sales operation. They will be looking for signs of development of our brands and of our consumer tastes.’

At Whitbread, finance managers do not work in isolation – they are at the heart of things. ‘They will often provide the challenge that might start a process of a review of the future status of the brand,’ says Coldwell.

They might propose ways to take a cost out of the process that will enable the brand to sustain for a longer period in a profitable way. ‘We make sure our role in finance is to train and coach our business operators into doing those things for themselves,’ he explains, stressing his own and the company’s commitment to a style of ‘enabling leadership’.

Diplomacy key to longevity

A cautious man who answers carefully, Coldwell is reluctant to acknowledge his department’s successes for fear that it would suggest accountants plough a narrow furrow.

Perhaps it is that sense of diplomacy that is the key to his longevity. He sits a tier below the group board and makes three set-piece presentations to the board each year.

But there are monthly meetings between divisional finance directors and the group FD to make sure the divisions are delivering the group’s financial objectives.

Giving nothing away, that objective is ‘to make sure we have the finance and the people to deliver the business strategy and to ensure we have the profitability and the cash flow that we expect of our businesses.’

The importance of this role became apparent last year. ‘In the summer it became clear that many parts of the business, especially the high street pubs and the restaurants, were suffering from a downturn in consumer spending,’ he says.

‘We believe that was a trend that could last a couple of years based on history, so we slowed down the capital spend and the growth of those areas of the business. Instead, we focused all our growth and our capital spend on those areas of the business we thought would sustain well during the recession if it came.

Profit warnings have been rife in the drinks and leisure sector, with Allied Domecq and Bass both issuing them in recent months. Coldwell acknowledges times have been tough, but says Whitbread has survived these challenges and can continue to do so. For any leisure business, recession is little short of a disaster. Most analysts seem confident the company is a solid bet. And Coldwell would drink to that.


A company director who stocks his office cupboards with beer might find his bosses questioning his ability to make clear-headed decisions.

Not so David Coldwell. The age of some of the special-edition bottles that grace his bookshelves testifies to his commitment to a company he has served on both sides of the Atlantic for almost 30 years.

Coldwell started his accountancy career at a small London practice before moving on to what is now KPMG, after qualifying in 1966. He soon moved for ‘the thrill of business’ to Mobil Oil, but hated the environment – too many decisions were made in America. In 1969, he joined Whitbread and in 1975 became finance director of its West Pennines division.

Coldwell was promoted to managing director of Whitbread in Salford in 1979 and by now the job was fast becoming a vocation. The 1980s – the decade of corporate excess – saw him decamp to its home across the Atlantic. As executive vice-president of Whitbread North America, he helped acquire a wines and spirits division.

‘Americans expect their finance people to stay in the box a little bit more,’ he says, but acknowledges that overall the differences in finance roles are slight.

Coldwell loved America but returned to the UK towards the end of the decade as Whitbread’s specialist director of corporate finance. His first job was to dispose of the wines and spirits operation – including Laphroiag whisky – he had worked to set up.

Realising a huge profit in the process, he says now: ‘That was one of my interesting phases of my career.’ In 1989, he was promoted to his current role.

Despite the excitement of that period, Coldwell enjoys working in the beer company. Building brands and getting a division of 4,000 people behind collective aims provide a driver and Coldwell, with his love of strategy and numbers, is at the heart of all of that. ‘Finance and the board role go very much hand in hand,’ he says.

Related reading